Hutchison Whampoa in Italy mobile merger talks

Hutchison Whampoa has resumed talks with Russian telecoms group Vimpelcom over merging their Italian mobile firms, encouraged by Hutchison's 3 getting the go-ahead last week for an acquisition in Ireland, according to several people familiar with the situation, Reuters reported on Tuesday (US time).

"The talks are live again," said one of the sources, who asked not to be named.

Vimpelcom has hired Morgan Stanley to advise on the deal, while Goldman Sachs is working with Hutchison, said the sources.

Mediobanca is also expected to have a role, said the sources.

Spokespeople for Vimpelcom, Wind, Hutchison, Goldman Sachs, Morgan Stanley and Mediobanca declined to comment.

The parties have held on-off talks for over six months and came very close to agreeing a deal in December, the sources said.

The clearance of Hutchison's O2 Ireland acquisition, together with a partial refinancing of Wind's debt, is now creating a new momentum for the deal to happen, said the sources.

Wind's current debt of 9.5 billion euros ($13 billion) has long been a hurdle to a deal, but the terms of a debt refinancing plan in April specifically allowed for a change of ownership.

Hutchison's 3 Ireland subsidiary finally got approval last week to acquire bigger rival O2 Ireland from Telefonica for $1 billion in cash, after lengthy negotiations with the competition regulators to allay concerns over the reduction in the number of network operators from four to three.

The deal is just the latest move by Hutchison's telecom subsidiary 3 Group to strengthen its position in Europe, where it operates in six national markets. Eighteen months ago its 3 Austria unit acquired French group Orange's Austrian subsidiary for $1.7 billion after similarly overcoming objections from regulators.

Now Hutchison, controlled by Asian tycoon Li Ka-shing, is turning its attention back to Italy, where 3 Italia is the smallest of the country's four network operators, behind Telecom Italia Mobile, Vodafone and Vimpelcom's Wind subsidiary.

Last year Hutchison approached Telecom Italia with a proposal to merge their mobile businesses whereby Hutchison would have taken a near 30 percent stake in Telecom Italia, but the proposal was rebuffed by Telecom Italia's core shareholders.

If Wind and Hutchison can agree terms this time around they would then have to convince the European regulators that reducing the number of wireless network operators would be in the interests of consumers.

But an important precedent could have been set by then, as the European Commission is due to decide by July 10 on whether to allow a similar consolidation in Germany, Europe's biggest mobile market, where Telefonica Deutschland wants to buy Dutch group KPN's local subsidiary E-Plus for some $12 billion.

Wind reported earnings before interest, tax, depreciation and amortization (EBITDA) of around 1.9 billion euros in 2013 and could be valued on a multiple of 6.5 times EBITDA excluding debt, said several sources familiar with the company.

Prior to a deal with Hutchison, Vimpelcom could seek to increase Wind's equity via a capital increase or raise cash through asset disposals, said several sources familiar with Vimpelcom's thinking.

Wind has long been expected to sell its telecom masts in Italy in a possible 500 million euro deal, but the process has not yet taken off because of the renewed talks between Vimpelcom and Hutchison, said several sources close to the situation.